Exit Strategies for Office Leases: How to Reduce Long-Term Risk

Office leases are among the longest and most expensive commitments a company makes. Yet many businesses sign contracts without a clear plan for how they will leave the space.

When headcount shrinks, markets shift, or hybrid working reduces desk demand, leaders can be stuck with millions in unnecessary costs. The solution is simple but often overlooked: plan the exit before you sign.

This article explains the key risks of office lease exits, the strategies to reduce them, and how CFOs and Facilities Directors can protect balance sheets with proactive planning.

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Why Exit Strategies Matter

· Business uncertainty: Headcount forecasts are harder than ever in hybrid work.
· Financial exposure: Exit costs (dilapidations, notice penalties, moving costs) can exceed £500,000 for a mid-sized company.
· Operational disruption: Poorly planned exits lead to downtime, lost productivity, and unhappy employees.
· Reputation risk: A messy move can affect clients and brand perception.

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The Most Common Exit Risks

1. Dilapidations

End-of-lease restoration obligations that can reach six or seven figures. Landlords often demand reinstatement to original condition, even after years of normal use.

2. Rigid Lease Terms

Without break clauses, tenants must pay rent until the end of the term, even if the space is empty.

3. Short Notice Periods

Break clauses that require 9–12 months’ notice limit flexibility.

4. IT and Infrastructure Migration

Moving servers, internet lines, and security systems can cause downtime and unexpected costs.

5. Employee Disruption

Moves that are poorly communicated can damage morale and retention.

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Smart Exit Strategies for CFOs and Facilities Leaders

Negotiate Break Clauses Early

· Push for multiple break points during the lease.
· Ensure conditions are fair (e.g. no requirement break penalty and tenant friendly break conditions).
· Time break options to align with business planning cycles.

Cap Dilapidation Costs

· Agree a financial cap on dilapidations before signing.
· Request a schedule of condition to avoid paying for wear and tear.
· Budget for reinstatement well in advance.

Build Subletting Rights into the Lease

· Allows you to sublet surplus space if headcount falls. Ability to sublet in both part and whole.
· Protects against paying for unused desks.
· Insist landlord consent cannot be “unreasonably withheld.”

Phase the Exit

· Move teams in waves to reduce downtime.
· Maintain temporary flexible space during the transition.
· Test IT systems in advance of the final move.

Include Exit Costs in Financial Models

· Don’t just model rent, include dilapidations, moving costs, operational costs (cleaning/IT) and downtime.
· Compare 5-year totals for traditional vs flexible leases.
· Present board-ready scenarios using LEVEL’s Office Cost Calculator.

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Case Example: Avoiding a £750,000 Exit Bill

A legal firm in Birmingham faced a £750,000 dilapidation claim at lease end. Luckily, they had negotiated a cap of £250,000. The foresight saved half a million pounds.

Without that negotiation, the CFO would have faced budget overruns and difficult conversations with the board.

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Step-by-Step Exit Planning Framework

1. Start with the End in Mind: Before signing, identify how you could leave the space.

2. Negotiate Flexibility: Break clauses, subletting rights, capped dilapidations.

3. Budget for Exit: Set aside funds annually for eventual move costs.

4. Map IT and Infrastructure: Plan migration well before the final months.

5. Communicate Early: Engage employees 6–12 months ahead to reduce anxiety.

6. Pilot New Space: Use serviced or flexible offices as swing space during the transition.

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FAQs: Office Lease Exits

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What are dilapidations in office leases?

Dilapidations are the costs of restoring office space to its original condition at the end of a lease. They can include repairs, decoration, and removal of alterations.

How much notice do you need to exit a lease?

Most break clauses require 6–12 months’ notice. Always check the contract. Shorter notice periods are rare but negotiable.

Can a company exit a lease early?

Yes, through break clauses or by negotiating with the landlord. Without either, tenants remain liable until the end of the term.

What is the cheapest exit strategy?

The cheapest option is often using flexible offices in the first place — since they avoid dilapidations and allow easier exit.

How can CFOs budget for exits?

Include dilapidations, moving costs, IT relocation, and downtime in financial models. Tools like LEVEL’s Office Cost Calculator make this straightforward.

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An office lease exit should never be an afterthought. It is one of the biggest financial risks hidden in property contracts. By negotiating flexibility upfront and budgeting properly, CFOs and Facilities Directors can avoid multi-million-pound surprises.

For companies embracing hybrid work, exit strategies are not optional. They are essential.

👉 Start by modeling your lease exit exposure with LEVEL’s Office Cost Calculator. See how break clauses, dilapidations, and subletting rights change your long-term risk profile.